EMC Mulls Deal Options With HP, Dell [REPORT]

EMC Corporation (NYSE:EMC) is considering various options including a merger deal with Hewlett-Packard Company (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL), according to The Wall Street Journal report.

Citing people familiar with ongoing developments, the WSJ reports J.P. Morgan Chase is advising the data storage giant regarding its various options.

Pressure from activist shareholder

Activist investment firm Elliot Capital Management has reportedly targeted EMC Corporation (NYSE:EMC) by pressuring the data storage giant to spin off VMware, Inc. (NYSE:VMW). The firm’s investment in EMC Corporation is estimated at 2% of EMC’s equity value, translating into the company’s fifth biggest shareholder. The substantial stake signifies one of the largest it has ever taken in the 37 years it has been in business.

The activist shareholder reportedly wants to talk EMC Corporation (NYSE:EMC) into spinning off VMware as he believes EMC stock will get a significant boost from the move. EMC owns a roughly 80% stake in VMware, which the data storage giant acquired in 2004 for $700 million.

According to The Wall Street Journal report, EMC Corporation (NYSE:EMC) has reportedly held talks with Dell Inc. (NASDAQ:DELL), though it’s not clear where any talks between the two companies stand. Citing a person familiar with the matter, the report says considering their relative sizes, it’s unlikely Dell would contemplate a full takeover of EMC and might instead seek to purchase assets including its core storage business.

EMC’s Off-and-on merger discussion with HP

The Wall Street Journal also reports that the off-and-on merger discussion with Hewlett-Packard Company (NYSE:HPQ) has recently ended, and it’s not clear whether the talks can be revived. Dana Cimilluca and Joann S. Lublin of The Wall Street Journal note a deal between EMC Corporation (NYSE:EMC) and HP would have been a blockbuster, considering the two companies have a combined market value of nearly $130 billion. However, citing a person familiar with the matter, the talks broke down a few weeks ago over financial terms and fears that both the companies’ shareholders would reject the deal and are unlikely to be revived.

Interestingly, Cisco Systems, Inc. (NASDAQ:CSCO) and Oracle Corporation (NYSE:ORCL) are also reported to be potential deal partners for part or all of EMC, though it’s possible none of the alternatives that EMC is contemplating will bear fruit.

CNBC confirmed today the merger talks held by EMC with rivals Hewlett-Packard Company (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL), though both EMC and HP declined to comment, while Dell couldn’t be reached for comments.

The merger rumors have also been fueled by the February 2015 retirement of overall EMC Federation CEO and chairman Joe Tucci, who has been CEO since 2001. It is pertinent to note the CEO has pushed back previous retirement dates.